Le cable bundle est mort, vive le OTT bundle !
the cable bundle is dead, long live the OTT bundle !
The past five years have seen the twin rise of Over The Top (OTT) services, namely Netflix, and the supposed decline of cable tv. Netflix rose from erstwhile Blockbuster competitor to early streaming leader, paving the way for North American and soon after, global viewers, to enjoy a wide selection of films and tv series, anytime, anywhere.
Cable tv had enjoyed a phenomenal rise since the 1980s, accompanying the adoption of the VCR and then DVDs and displacing Over The Air as the primary access to television, its penetration rate surpassing 80% of North Americans. The relative decline of cable tv has started, and this twin movement’s acceleration is real, with the spread of cordcutters, cordnevers and other portmanteau buzzwords.
The real culprit: the broken discovery experience for “content” — which we use to call films and tv shows, coupled with a never ceasing price raising of cable bills, fattened by unwanted and unwatched “channels”.
Average North American cable bills have ballooned above $100/month, sans internet access, and have contributed to boost profits and line the pockets of the Disneys of the world, thanks to the prescient acquisition of ESPN for example. The pendulum is swinging to an unbundling of cable, which is now the law in Canada, where cable carriers have until March 1 2016 to launch $25/month “skinny” bundles.
The rise of Netflix, now used by 51% of the US public (so much for the Albanian army Jeff Bewkes), is similar to the rise of HBO in the early 1980s. As HBO served as the accelerant for cable in a lot of homes, Netflix is fueling OTT and the acquisition of Apple TVs and Rokus by households.
What’s still broken ? The discovery experience for viewers. It doesn’t take a whole lot of surveys to realize that the blossoming of OTT services at $4.99/month is already irking consumers who do not want to worry about managing multiple subscriptions, even in the name of choice. Therein lies the “paradox of choice” and the pent-up demand for simplicity and elegance, which are at the core of the coming soon OTT bundle.
How would this OTT bundle work ? Viewers are at the same time fed up with pricy cable tv bundles but equally reticent to pile up subscriptions to more than a handful $4.99/month services. The sweet spot would be combining the best OTT services for a bundled monthly package fee of less than $50/month. The selling point would be the ability to opt in/opt out of several OTT options and the single price point.
Who is best positioned to deliver this OTT bundle ? First and foremost, the incumbent cable and satellite carriers, as well as their pure telecom competitors such as T-Mobile and Sprint. Their advantages: brand recognition, oodles of cash flow, “control” of the last mile delivery into homes and, for the pure telcos, the possibility of bundling their telco services with OTT.
Is there room for a new entrant to launch this OTT bundle ? Of course. Those of us who are fond of corporate history can trace back the roots of behemoth Comcast/NBCU to a small local cable carrier with 1M customers in 1986.
Who would be a good “outsider” candidate for an OTT bundle service ? Given that Netflix is showing investors and consumers the benefits of a true global expansion strategy, why wouldn’t there be a global OTT bundle ? Yes, it’s a right management maëlstrom but therein lies the competitive barrier which could be harnessed by a global content player already active in a related business. The candidates are few and far between: Viki (owned by Japanese digital giant Rakuten), Vivendi and most interestingly, Spotify.
What are the benefits for Spotify ? Obviously they would be leveraging their global brand, already well established in key markets, and it would be a great entry mechanism into video. Just as Netflix leapfrogged everyone from the DVD market into streaming, Spotify would be hedging the future, just as YouTube is launching its music service to much anticipation.
update: Amazon announced on Dec 9 that it was diving into the OTT bundle by offering Showtime and Starz as add-on options to its Prime video service. It seems like the OTT bundle is already on its way !
